AI Transforming AEC: From Design to Recruitment and Beyond a Conversation with KP Reddy
Randy 00:00:03.400 - 00:01:30.330
Welcome to the Zweig Letter podcast, putting architectural, engineering, planning, and environmental consulting advice and guidance in your ear. Zweig Group's team of experts have spent more than three decades elevating the industry. By helping AEP and environmental consulting firms thrive. These podcasts deliver invaluable management, industry client marketing, and HR advice directly to you free of charge. The Zweig Letter podcasts elevating the design industry one episode at a time today we're excited to have KP Reddy with us. KP is the founder and CEO of Shadow Ventures and a visionary in the world of technology and innovation, especially within the AEC industry. He has successfully founded and exited three tech companies, written key books on building, information modeling, and AI, and has extensive experience guiding startups. KP's insights on AI and its potential to transform industries are cutting-edge, and we can't wait to dive into his expertise today.
KP, welcome to the Zweig Letter podcast. How are you doing?
KPReddy 00:01:30.450 - 00:01:33.154 I'm great, thanks Randy. Thanks for having me.
Randy 00:01:33.282 - 00:01:57.960 Good, good. Listen, I'm glad we had a chance to catch up and do this episode.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
This has been something that we have been trying to put together for a while for our audience and for the sake of just giving them a quick introduction. Tell us a little bit about Shadow Ventures specifically and the work that you're doing—- AI space as it pertains to the AEC Industry.
KPReddy 00:01:58.260 - 00:03:01.844
So Shadow Ventures, I would say a classic venture capital firm. We make investments into startups that are in the tech startups that are innovating— the AEC space or the real estate space. So a lot around design technologies, construction technologies and real estate technologies. What is somewhat unique about us is we are backed by many of the leading ENR 500 firms. So call it Sixty percent of my investors that back me are from the industry and what that does is it gives us a great lens around what their problems are and what they're dealing with. We can't know everything, so it creates this great council of such to balance ideas off of them. I think one thing that people don't necessarily understand in our space is how venture capital works and so a lot of it is educating the industry on how VC works and how we make money and then also how we work with our investors, the backups.
Randy 00:03:01.972 - 00:03:32.764
Yeah, and it's funny, I was talking with Chad Clinehens about just a little bit about you and this, and he was sharing how you guys are both kindred spirits because your background is civil engineering, just like Chad, the president and CEO of Zweig Group. And, so you have a unique frame of reference about this space. So you're not coming in purely from a tech space, you're coming in with the background and classical training as a civil engineer, one hundred percent
KPReddy 00:03:32.852 - 00:04:32.710
I'm a second-generation civil engineer. I grew up in my dad's office, and I would say it's interesting. My dad was a civil engineer and my mom was a computer programmer so this is what you get. I got involved because my dad made me go to the office. Also, when I was 13, he bought an IBM PC, not knowing what to do with it, but just that his professor friends had told him, it would change everything. So, like most good Indian dads, he said, hey, son, here's a PC, go figure it out. I began running structural engineering software for him, not knowing what I was doing per se, under his direction. Still, it also exposed me to his firm and everything from how things work in an engineering firm. So when I went to Georgia Tech, I decided to stick with civil engineering because I felt like I already knew a good bit about technology. KPReddy Email: kp@shadow.vc Website: Shadow Ventures
Randy 00:04:33.210 - 00:05:29.244
I remember those days, too. My mom bought me a, I don't know if you remember the Commodore Vic. I got a Commodore Vic computer, and I learned how to do a little bit of programming back in the day, and that was my entree into computers. And, I think you're Gen X, Chad's Gen X, and I'm Gen X. So we were all exposed to computers at the same time, not similar to what our kids are experiencing nowadays, which is a whole different ballgame. Technology is moving fast and furious nowadays, so it's interesting to see how quickly we adapt to the changing technological landscape, especially in the design industry. Speaking of AI, when OpenAI and Chat GPT hit the market a couple of years ago, what were your initial thoughts about it and how it potentially could impact the AEC space? KPReddy 00:05:29.422 - 00:06:44.826 I have been building stuff in AI for about ten years, and I think my initial reaction was that it's my job to keep up with what the technology companies are doing. And so it wasn't like new news, but it was interesting nonetheless. And I think what it basically did, was say, how do we bring AI to the masses? How do we bring AI to people's desktops? Their phones, which before that, it was just very complicated related to the early days of the Internet. I was one of those Internet kids and so, the web browser made the Internet accessible to Joe Public. Without a web browser, if people had to go in the command line, they'd probably be lost. So, I would say, this interface allowed people to understand and experience AI and to understand, quite honestly, that AI has always been the background, whether it was with Google searches or whether it's Netflix. We never were actually participants. We were never a human in the loop, so to speak, it was always behind the scenes so I thought it was formidable to see how consumers were going to react to it. Randy 00:06:44.938 - 00:07:54.394 Yeah, I'm getting that now. I just updated my iPhone to the latest iOS, which allows you to utilize artificial intelligence.
And I think it's going to be fully available in the next month or so.
But just playing with it a little bit this weekend had me realizing the potential is limitless in terms of the capabilities of AI and how it's going to fundamentally change the way that we do KPReddy Email: kp@shadow.vc Website: Shadow Ventures
everything. But when you start thinking about AI and the design industry, an industry that has historically been slow to change and slow to evolve. We like things the way that they are. I've been in this industry since 97, although I'm not a classically trained engineer like you or Chad, I've had experience working with and consulting design professionals for almost 30 years. And so I know for a fact that design professionals don't like change like that. And so what advice have you been giving people as it pertains specifically to AI and the way that it can fundamentally change the way that design professionals do their jobs on a daily basis? KPReddy 00:07:54.522 - 00:10:46.350 My opinions, like many opinions, are formed through listening. I have relationships with most of the ENR 500 and mid-sized firms, even some small firms.
I'm advising a 20-person architectural firm right now on how to work with AI in their business.
And so really what I've heard from leadership is that they believe they are going to wake up in the next five years and the entire industry is going to be on its head. This isn't my fear-mongering. This is what they're telling me and what they are focused on is not the technology. Unfortunately, technologists focus on the technology. These are business leaders. They're focused on how we think about business impact and how we take advantage of this which led to me writing my book last year and releasing it a few months ago. It was to be focused on what I'd been hearing, which is I need a business solution to this and also understand that. Remember that little company, Amazon? They started to sell books on the Internet. It was, we're going to take brick and mortar. We had toys.com, and we had pets.com. We had all the.com, right? Amazon said we're just going to sell books on the Internet. I think we all know that's probably a very tiny part of their business. So when leaders look at this business, and I'll tell you that the coolest thing about what I'm seeing from leaders in our industry. I’m not dealing with IT people, I am dealing with the CEO's and board of directors of all these companies. The reason is that not since the BlackBerry have I seen such intrigue by the C-suite around technology. They're going down to their IT department and say, hey, what are we doing about AI like have you even been looking at it?
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
Do you know what you're doing? They're doing all the research. They're not delegating the research. They're all in on it and BlackBerry, the same thing.
Like, I saw a guy on the golf course with a BlackBerry. Where's mine? What are we doing here?
But there are some executives who never walked down the hall into the IT department and said, oh, I need BIM on my side, I need Revit on my laptop or I need ESRi, They never asked for that, right? And so I think it's the business leaders that are driving change. And I think what a lot of people miss is this is not happening to the industry. The leaders of the industry understand the opportunity. It's not fear. What I'll tell you is middle management is operating in fear, but executive management is not operating in fear. They're operating in a state of opportunity and definitely focused on a really strong growth mindset. And so I think it's super interesting. They don't know how to communicate it to their teams. I will tell you, that 100% of the CEOs I deal with believe in this future. They don't know how to talk to their people about it without making it sound like they're not going to have a job. It's funny because on the day that we're recording this just last week, Zweig held their Elevate AEC conference in Tampa and part of Chad's opening keynote about the changes that this industry is going to experience in the next five years is massive, first of all. And secondly, one of the biggest challenges for C-suite leaders in the design industry space is developing the language around AI in terms of how they articulate and sell it to everyone. I hear what you're saying for middle managers, but even middle managers have to figure out and understand ways that AI is going to benefit what they do and make maybe their job even easier than it was before. Randy 00:10:46.510 - 00:11:35.126 I think that the challenge is so many people are focused on LLMs, OpenAI, and Copilot, and that is such a tiny part of the opportunity specifically for our industry. And the way I best describe LLMs and ChatGPT, etcetera, that is just literally the Rosetta stone of humans and machines. That is the interface of how we engage with a computer. That's all it is. Beyond that, does it have some features? Absolutely. Does it have some capabilities? Absolutely. But if you think about our ability to interface flawlessly, it's hard enough to communicate with another human. That's just one of the biggest things that people struggle with communicating with other humans. KPReddy 00:11:35.318 - 00:13:03.410
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
And what LLMs have done is made it much easier for us as humans to communicate with computers. I think that's where people need to understand that's a small part of it. There's so much more happening in AI in our industry that a lot of people aren't paying attention to. It's like the early days of the web browser. If the Internet was about surfing the Internet, then we've all wasted our time, right? So I think, not since the Internet have I seen a super cycle like this. One of the key things to remember is people are using AI to write AI code. So the exponential of how this thing is moving is nothing like I've ever seen. I don't think anyone's ever seen anything like this before.
Randy 00:13:03.570 - 00:13:18.812 Yeah.
Give me one example of what you were just talking about in terms of what people are not realizing, in terms of, like, the tip of the iceberg of the potential of AI beyond, like you said, the LLMs and stuff like that.
KPReddy 00:13:18.956 - 00:14:47.172
So I'll give you a great example. So the current processes, we do a concept plan, we do schematics, we do some DDs, then we do CDs and specs, and we do all this work, right? It's very iterative because we don't want to go too far too fast. After all, the cost of change gets greater and greater as you start to define the project. What we're seeing with AI is you're going to go straight from a sketch to shop drawings. There's no reason to iterate because it all auto-generates. And so if you think about what that does in terms of, if you talk to any developer and owner, which I talked to a lot of them, their biggest complaint about our industry is we move too slow. Oh, my gosh, you guys are always late. Interest rates have come down a little bit, but when interest rates are higher, you know what it's costing me every month just to keep this project going. And the architect comes back and is like, oh, sorry, it's going to be three more weeks before we can make this one minor detail. So you're seeing these transformations happening. There's a company in our portfolio called aren.ai. You can fly a drone, and it'll automatically create a 3D model of a bridge. You fly a drone around a bridge, it automatically creates a 3D model. It will identify all the cracks and defects in the bridge. KPReddy Email: kp@shadow.vc Website: Shadow Ventures
It will run an engineering analysis on it, and it will tell you which cracks to fix by flying a drone. No more engineers dangling off of a bridge. Randy 00:14:47.316 - 00:14:48.636 Yeah, right.
KPReddy 00:14:48.668 - 00:15:40.308
So when you look at how a bridge collapses, like every month in our country, because we have not maintained our bridges, they're solving a real problem. I hate to say it, but they're taking engineers out of the way. But then when I talk to engineers, they're like, we don't want to do that anyway. Who do you think wants to dangle off of a bridge and inspect them? Part of the reason why many bridges in our country have not been inspected. You can't find people that do it. Everybody's very busy. Do I really want to send an engineer out for $50 an hour to climb on a bridge because that's all the government will pay or do? I want to deploy them on a commercial project, billing them at 150 an hour. So those are all real things that are happening now. This isn't the future. I look at 20 startups a week, and half of them now are AI. But I'll tell you, five years ago, when I started, most of them were AI.
They just didn't talk about it. It wasn't in the vocabulary of discussion.
Randy 00:15:40.444 - 00:16:15.496 And it’s so funny as you mentioned you just happened to bring up the example of bridges. I know for a fact that when they talked about the whole infrastructure programs throughout the country, every state has its own infrastructure list of projects to be done. I know here in Arkansas where I live, I think there are some ridiculous number of bridges that need to be inspected and repaired. And what you're talking about with aren.ai would certainly help speed up that process and allow engineers to probably cover way more ground than they can cover right now. KPReddy 00:16:15.648 - 00:18:03.180 And I think one of the things that comes up, and I'll tell you, whenever an industry tries to default back to, well, what about regulatory?
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
Who's going to seal these drawings? Let me tell you, if that is your last defense, you're already done. You're already done. That is not a business model. Like, oh, who's going to stamp our drawings? Like the CEOs, I mean, many of them are my investors. They just don't know how to tell people, like how is this change happening and what is it going to mean to their career because they know better. In fact, a lot of the regulatory conversations happening right now are you might be at risk if you don't use AI. In other words, if the new standard of care in architecture and engineering is using AI tools and if you're not using them, it could be in fact that you're more liable by not using AI tools. It'd be like hand drafting. If you started back to Vellum and Penn, you're probably open to more liability than using CAD or BIM or whatever.
So it's very interesting, let me tell you, this stuff is moving fast.
And when people ask me like, well, you know, regulatory piece is not going to happen. Well, I know a lot of the large VCs are funding lots of lobbyists right now to make a lot of these laws change, whether it be in engineering, whether it be in architecture, or accounting. What does a CPA stamp mean? Does that mean that that person has reviewed every number in detail and looked at it 100 different ways like a computer can? No, it does not mean that. It means that they are comfortable with their agents, the people who work for them.
That is what they're comfortable with. It doesn't mean that they've looked at every detail.
Randy 00:18:04.000 - 00:18:38.636
Well, even with that example that you gave of the CPA, I think if anything, it frees them up to focus on the bigger issues that do result from, say an audit or some type of financial accounting review that requires a couple of extra sets of eyes. Now you have an AI set of eyes, and then you have the CPA, who is classically trained, and they're able to inform their client based on the findings of what AI comes up with and verify it. So, I mean, I think it makes a huge difference. KPReddy 00:18:38.708 - 00:19:09.720 And possibly spend more time on being creative and coming up with new services and new ways to serve their customer that are of higher value. The problem is we all do these.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
There's a commodity part of everyone's job that people do not enjoy doing, and you don't really get paid enough to do it. If I can stick with the high value, would you rather have 100 engineers building out at $1,000 an hour or 1000 engineers building out at $100?
Randy 00:19:10.200 - 00:20:39.418 That is an easy solution for sure to come up and pick that one.
So I wanted to ask you because I know that there are two other areas, specifically because we could go down a long list of ways that AI is going to fundamentally change the way that design professionals, engineers, and architects practice on a daily basis. But I want to talk also about some of the other aspects of this industry that are not so much sore points but are some of the bigger challenges that we're facing. And we talked about this before we started recording, the adoption or incorporation of artificial intelligence, or AI into the whole aspect of recruitment and retention, which when you ask everybody in the design industry space, it is the number one problem that all design firms are struggling with. Our people talent - how do we find enough? First of all, they're not printing enough architects and engineers coming out of school. So that's the first issue. We've got to get more kids through, even as early as elementary school, thinking about the design industry space as a profession. But even for the firms right now, that's all well and fine in the next ten or 15 years, but I need some butts and seats right now and I can't get them. How will AI, or how is AI - are you noticing or seeing what AI is able to do in this whole recruitment and retention space? KPReddy 00:20:39.594 - 00:25:15.810 So there are a couple of things. I'm in the business of telling real stories from real people. I literally had to call this morning from one of my former interns. They have an undergrad and master's degree in structural engineering from one of the top engineering schools in the country, and they quit their job. And when I said, I, are you leaving the profession? They said I was so bored sitting at my computer doing calculations. My boss was boring. I don't think I was learning a whole lot from them. And this is, you know, I felt bad. I hung in there longer than I should have because I've invested so heavily in this education. But I had no idea how boring this thing was. And so I've said I think you were working for the wrong person, was my first reaction.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
They said, yeah, I still know I do not want to sit around. I don't know why we're not using something like AI to do all this work. And then I can be more creative working on the solutions. But they said, it feels like structural engineering is a data entry job, and I think that's a challenge, right? This idea that young people, early career people, come out of college and we have to make them pay their dues and make them do all this manual work and grunt work because they've got to pay their dues and they need to learn how things work from the bottom up. I'm like, we get to hand them their computers and hand them calculators. We can advocate. How far back do we go to say a young engineer or architect has to pay their dues? One, we've got to kill that vocabulary of, like pay your dues. Give people the best tools that are available, and let them run, right? That's what everyone wants. I think culturally, we probably came from the generation we did as we were told. We didn't have the confidence of this younger generation. But I'll play this younger generation. They are much more confident, and they are a lot smarter than we are. We can sit here and have debates like, every generation complains about the next generation. We were lazy to the boomers. But I'll tell you, the generation coming out, they are figuring it out faster than any of us, and they do not want to work for an employer that's got their head stuck in the sand. The second point I'll make is we have to start thinking about this wild idea. Does everybody in an architecture firm or an engineering firm need to be an architect or an engineer? If you go to a doctor, there are so many other people who are not doctors.
You spend ten minutes with your doctor, you spend an hour with everybody else.
And this bias we have that, oh, you can only be an architect or work in an architecture firm outside of, like, marketing and admin on the same thing with engineering. As these tools get so accurate, why do you need to be an engineer? Maybe you need someone who has a better relationship ability, who can manage customers better, who communicates better, and all the other skills that the customers of AEC firms massively complain about. It's very rare that a real estate owner or developer says, I don't like the way they design buildings. That's rarely the point. It's usually that they don't communicate well. They don't understand how to manage a project, they are always late. I do not understand their invoices. It’s everything but the work that the KPReddy Email: kp@shadow.vc Website: Shadow Ventures
profession does. It’s what the owners complain about. They don’t like us. If you talk to owners and developers, we are a necessary evil for them to execute them on their work. They do not enjoy our time. They do not enjoy working with us. As much as I enjoy working with my lawyers and accountants, that's how much they enjoy working with us. So now you can actually bring people in. Maybe they were a solid C student or a solid A student, but they have an English degree and because of AI tools and because they have creativity, they can start thinking about design and they might be better at managing a customer because they have better communication skills. We have to think a little bit differently. I talked to an engineering firm, they have 100 openings right now. They are getting, on average, one resume per opening. The talent doesn't exist and we can sit here and keep recruiting from each other. It's all that happens but we're not adding any new talent. So I think AI will allow people who may be less technical to use these tools to execute more work. The stuff that's hard to scale in our industry is customer management and relationship management which is very hard to scale, that requires people. I guess the easiest way to describe what you just said is that's a very sobering take on our industry. Where we are currently today in 2024, and where we're going to be headed, it's important. You said a couple of things that stood out to me, one being able to attract individuals with a strong capability when it comes to being relational and not so much transactional. There is a mark of creativity about them that affords them the ability to be flexible and malleable as they learn more about the industry. I remember Mark Zweig saying something to me when I first got involved with the industry in 97. This version keeps your points clear and connects the ideas for a smoother flow. Let me know if you'd like any further adjustments! He said, it's going to take you a couple of years to learn the language of the design professional, but once you learn it, you'll be all set. And I would venture to say that nowadays, today, you can learn the language even faster. And AI can certainly shorten the period of time that is necessary to speak the language of a design professional or someone adjacent to that space. Randy 00:25:15.970 - 00:26:25.374
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
KPReddy 00:26:25.542 - 00:26:37.622 Yeah. I mean, 100%. And you know what's interesting? My eldest son is a mechanical engineer, he swore, Dad, I'm not going to be in your industry. He's working for an architecture firm right now. He is building an innovation department for them.
Randy 00:26:37.726 - 00:26:38.198 Cool.
KPReddy 00:26:38.294 - 00:29:01.998 But he swore off it. I think the one thing that our industry just makes it so appealing is we deal in the tangible. I worked for Frank Gehry, so I drive by buildings that I worked on that I was involved with, and I might have had a tiny little slice. I'm in the Bay area and I worked on the Apple campus. So when I drive by there, I mean, I had a little tiny part in it, but it feels like it's mine.
That's a great feeling,. The satisfaction around these things.
And so I think we have that going for us, but I think we have to think about what it is that we do. And you know what? When you think about when you graduated when you went to school for this stuff, you wanted to go do things of impact and we shaped society. That is our business. Our business isn't doing door details. That is not our business.
Doing drawings is not our business.
So my real hope for the industry is if we leverage AI to do a lot of our grunt work, it gives us a lot more time to serve society in a more meaningful way because I don't think we're doing it as meaningfully as we should be. We are the ones that should be solving a water crisis, an affordable housing crisis. It's not politicians, it's us. But we're too busy drawing drawings. We're too busy doing that stuff to work on solving the big problems. My hope is we can get back to solving the problems and let AI do the groundwork for us. The other point I'll make is firms that do not approach this the right way, their best people will leave and start firms.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
If you're using between AI and cloud offshore, you could walk out of a firm today solo and build a five to $10 million revenue firm with no employees. It's very possible. And the smartest people in your firm, all they need is a customer, and they can walk out the door. They don't need an accounting department. I don't know if you saw Klarna, which is a financial services company, they got rid of Salesforce and worked it. They covered all their accounting software because AI is handling the accounting, and don't need software anymore. So think about that. The ability to leave a firm with two or three key customers and start a five or $10 million revenue firm all by yourself, because AI is doing all the work. So I think the wave of entrepreneurship is what I'm excited about, too. Randy 00:29:02.174 - 00:29:55.490 I listened to a guy named Greg Eisenberg talk a lot in the space of just spinning up companies. That's kind of a passion of mine, just talking about and learning more about that. But he said, we're not far off of the first billion-dollar company that's started by one individual who leverages AI to build it, which is insane when you think about it. When you think about a billion-dollar company, in your mind from the old Wineskin school of thought, you're thinking, oh, this is some big building with thousands of desks and thousands of people. And honestly, we're at a scale and a time and a place where AI is going to allow an individual with an interesting intellect and vision to build a billion-dollar company on the back of artificial intelligence. KPReddy 00:29:55.570 - 00:31:23.364 One hundred percent and us in the venture capital community, we're trying to find these people. We're trying to find these folks. But I think one of the things to remember is what this does when you think about meritocracy and the best idea is winning, it doesn't happen often enough, because if you have a great idea, then you better have friends with a lot of money to help fund your idea.
You better have access to the right people to buy your idea. So it's really hard.
And when we think about technology and we think about meritocracy, there's a reason why there's been a lack of diversity and stuff in Silicon Valley, in the tech world, because as much as
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
we want to talk about it as being a meritocracy, you can't be a venture capitalist unless you already have money. That's just how that is. You can't start a company unless you either already have the network for people to fund you, and you go to the right colleges, all your buddies at Stanford and MIT, or they will fund you or you have to have worked in a space. And so I think AI, is the opportunity to build a great meritocracy where the best ideas win. I joke around, it's like, it's where Betamax can win, not VHS, Betamax. It's that kind of idea so I'm very excited about it.
I get out of bed every day just super excited about all the things that are going on.
Randy 00:31:23.492 - 00:32:51.660 I feel that same way, too. It's so funny you mentioned the Betamax reference.
They're going to be a subset of this audience for this show that doesn't know what that reference is. So I think that's hilarious. I understand that take on artificial intelligence specifically as it pertains to recruitment and retention. What about how AI will play into the other big areas of this industry right now? It just seems that every time I look up, I'm reading about another firm that has either merged or been purchased by somebody else or been acquired. I was sitting with a good friend of mine at the Elevate conference last week, and he was telling me about the acquisition of his company, which was about a 200-person firm, into a 2800-person, you know, ENR 500, huge company. There was a learning curve there, but nonetheless, he said, everybody in the leadership stayed on and they only lost a very few people which speaks to the whole issue of being able to incorporate one company culture into another. That's always a challenge. But I'd be curious to know what are your thoughts specifically as it pertains to AI and how M&A is going to continue to grow and proliferate in the design industry space. KPReddy 00:32:51.820 - 00:36:18. I run an advisory practice, not specifically to M&A, but more around innovation and AI. More recently, AI has been a subset of innovation. And one of my advisory clients, power engineers, just got purchased by WSP and a lot of people have asked me about the valuation. It's like the deal of the century type numbers.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
And what I would tell people is you had a very forward-thinking CEO. I'd like to say that I played some part in it, but like many things, I was helpful. I tried to be helpful along the way as an advisor, but it was a CEO who understood and could communicate the value of the innovation they had created and the innovation aspects of their business. So, if you want to maximize the enterprise value of your firm, it's not good enough to say you're innovative. What it takes is to demonstrate that you're innovative and to communicate it. So I know lots of innovative firms that are terrible communicators of what they're doing. Now, I've advised Thornton Tomasetti, and firms like that as well, which have had a great history. I've been working with Thornton Tomasetti for almost twelve years now and it's the two pieces, right? So I see lots of firms that are doing highly innovative stuff. They are not disciplined and structured about how they think about what it's worth, and they communicate it very poorly.
I would say we're a little bit of a nerdy industry. So we're very good at building nerdy things.
We're terrible at communicating what the value proposition of those nerdy things is and why it matters to enterprise value. So one is the M&. How do you maximize value from the innovation you're doing? So that's one area. Two is post-acquisition. We've been helping some firms understand what you want to happen, what's most important? The two firms are trying to get to know each other. So building a data lake of customer data, and project data, because it takes years to integrate the CRM systems and the accounting takes forever, right? But what do people want to know the day after a merger? They want to know, do I have this resource in this new firm?
What project experience do they have? All those things that are stuck in these silos.
But if you throw all that into a data lake and run AI on it now, all of a sudden, think about having an internal chatbot that tells everyone at new firms, the acquiring firm or the sole firm, what they have, right, or have we ever done a water treatment plan in Wisconsin? Well, it's sitting in a CRM somewhere, but until everything gets integrated, there's no way to know that. Do we have someone who can do archaeological studies? This idea of how we understand both firms very quickly, I think there's a huge application for AI that we've been working on with firms to understand that before you can integrate all the systems, let's make sure we're sharing lots of information to get the leverage right. You merge companies because you want to build something bigger and that one plus one equals five. You have a lot of mergers, one plus one barely equals two. KPReddy Email: kp@shadow.vc Website: Shadow Ventures
So they talk about synergy. So we think actualizing synergy through AI is a huge area that we have been very focused on advising clients on. Randy 00:36:18.166 - 00:36:57.632 Yeah, I've always said that the transfer of knowledge in our space is tantamount to the overall success of a design firm. Those firms that are able to transfer knowledge between generations and between organizations within that company, I think are more successful than others. And you give the vision of a data lake, which I've heard described before, but it's just another nice way of saying how do you get all this information into one repository that everybody has access to? And then how do you train or teach everybody to ask the right questions to access the data that's in that lake? By the way, one of the biggest fallacies that is being sold by what I would call… There are a lot of AI consultants out there, by the way, what I call AI charlatans. Ask them what they were doing 30 years ago in technology, I just learned how to use AI last week is not the right answer. One of the biggest misnomers is that in order for me to leverage AI, all my data has to be structured. Well, in fact, the opposite is actually true. That's the whole point of AI. If you had to structure all your data, that's called data analytics. That's just business intelligence. The whole point of AI is you don't have to have a high degree of structure around your data. That's the whole point. So I do get concerned. I'm seeing a lot of consultants out there, quote-unquote, training firms on AI. KPReddy 00:36:57.776 - 00:38:11.178 And the one person I thought was doing a job, I have added to my team, and the rest of them are really struggling to understand the business cases and the technology. Keep in mind, that this technology moves very quickly. My CTO has been with me for 18 years. He's on the key window. I think I know a lot better, but I do a better job by surrounding myself with people who know more than me.
Randy 00:38:11.304 - 00:39:03.640
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
Yeah, that's the Steve Jobs mentality of hiring people that are smarter than you so it does help you out. In that same vein of what you just described about the AI charlatans, what would be one or two questions that a design firm leader could ask a potential consultant that might help inform them on whether or not that individual is ready for prime time to even help them out? Because you are absolutely right and I'm always amazed at people who put out that they are an AI expert. And I'm like, this information literally just came out yesterday so how are you an expert in the last 24 hours, I have no idea. I'm consuming as fast as I can and I still know very little. I've been involved with AI since it began, or at least since it began in its current state that we have experienced over the past two and a half years. KPReddy 00:39:03.750 - 00:39:56.152 Ask them what they were doing in AI five years ago. It's a good question. Ask them how it relates to business strategy.
And then, some of the basic stuff is just asking them who they've been working with.
There are a lot of technical things that change, but if you haven't been working with clients for a certain period of time in technology, let's not confuse it. AI is technology. If a person has no experience in technology and they just picked up AI for dummies, then they're not the right person.
I also think the strategy side of it is super important.
If they can't answer questions about data privacy and how to approach it and those types of things, I think it comes back to just hiring people who have credibility in the background.
Randy 00:39:56.306 - 00:40:34.298
And I think it's going to be fairly obvious fairly quickly whether or not individuals are worth their weight in terms of their ability to be a consultant to you in that AI space. My advice to all design firm leaders is just to be careful. And certainly KP, I'm sure in a lot of instances, either you or maybe somebody on your team might be available for just a simple consult or some basic advisory around this. So before somebody goes off and writes a five or six-figure check that they might be able to get a little bit of help before they go down that road.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
KPReddy 00:40:34.434 - 00:40:43. I’m pretty approachable. And if you can follow me on LinkedIn. Nobody's writing my LinkedIn other than me.
Randy 00:40:43.162 - 00:41:29.376
I actually got a lot of information about you and just learned of the stuff that you were playing with and doing from some of your articles and some of the stuff that you wrote about. And so as a thought leader, I think that's important to recognize who are the thought leaders in this space that are speaking specifically to the problems that we as design professionals are encountering on a regular basis. That's another good way to look at it too. If you're not connecting with someone who is, what I would say is publicly sharing what they know, then that might also be something because it's not a secret, I don't think.
I think people that are out there are working in public and showing their work.
KPReddy 00:41:29.448 - 00:42:09.428 No, 100 percent. I've written a book on it. It's my third book. I do share a lot of content. The reality in my world. My advisory practice is pretty small. I'm not trying to keep 1000 people billable. So for me, I'm just trying to help the industry out by publishing content. I publish a lot of newsletters. There are a hundred ways to learn this stuff. I could be doing different things. I grew up in this industry. I want to see everyone in this industry succeed but I also recognize I need to meet them where they are.
Randy 00:42:09.564 - 00:42:10.096 Yep. KPReddy 00:42:10.188 - 00:43:00.264
Both size economically and where they are on their journey. It's amazing when I give talks, people come out to me and they say, how do I get started? I'm like, well, what have you been doing? They're like, I've been doing nothing. I'm like, well, how about you download ChatGPT? Let's start there. KPReddy Email: kp@shadow.vc Website: Shadow Ventures
And I really do focus on meeting people where they are because I think this industry deserves the love and care, so to speak. There's one of me to go around and that's always a fit for everyone and even people on my team. We only have so many hours in the day, so we do try to publish a lot of content. I try to respond. I wake up every morning to 150 LinkedIn messages. When I delete the 50 that are from recruiters and people trying to sell me franchise opportunities, I try to respond to the other hundred, so to speak. Randy 00:43:00.392 - 00:44:21.808 Good. I love that. I'm going to end with this because there are so many different directions that we could go. And I want to be respectful of your time and hopefully, we can probably have you back. I think the feedback that we'll get from this episode will be tremendous. I've always had to remind design professionals that the work they do really does matter. In a lot of instances, it is a life-or-death proposition. I always say when I do leadership training, I'm like, you guys, being design professionals are responsible for the built environment. And sometimes they just need that reminder to know that the work that they do really does matter and that there's no space to phone it in or anything like that and they have to also carry themselves a certain way. And I think in the same way that they carry themselves as design professionals, they need to carry themselves with the understanding that things like AI are going to fully inform what they do moving forward. And if they want to take the ostrich approach of just sticking their head in the sand because they are just afraid of what the future holds with AI, then we, our society are going to be a direct benefit of that inability to be malleable as things change and as new opportunities arise. KPReddy 00:44:21.984 - 00:44:51.2 I try to remind my friends that you didn't get into this business of size pipes. That is not the job, right?
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
If we can get you back to doing what you envisioned at the society level and from the customer perspective. If you look at all the top societal issues we're facing right now, they're all in our hands. There's very little that any other industries are handling. The accountants aren't contributing in thisway. Randy 00:44:51.354 - 00:45:08.516 Yeah, no offense to the accountants, but yes, absolutely. KP, for anybody listening to this today who wants to connect with you or reach out to you outside of, certainly I would encourage, and we'll put all of this in our Show Notes for this episode. What would be the best way for them to connect with you? If you just want to learn about what's going on, follow me on LinkedIn. That's a great place. I publish two to three times a day. I have a weekly newsletter that goes out. It's a great easy way to connect to me. If you want to connect with me more directly, email me at kp@shadow.vc . My inbox does get full and I might hand you off to somebody else if they're better equipped to help you. KPReddy 00:45:08.628 - 00:45:39.042
But I do process my four or 500 emails a day pretty well.
Randy 00:45:39.186 - 00:46:38.888 You also have that KPreddy.co which has information about you specifically where you're speaking, your biography, and some additional cool resources. So I would also encourage people to visit that website as well. So that's KPreddy.co. In addition to shadow.vc. So there are a number of different ways to connect with KP and we would certainly encourage you to do that. And remember folks, if you do that and it's directly a result of this podcast, please mention that to KP and tell them how much you appreciated him coming on and sharing his expertise and knowledge with the Zweig Letter podcast community. So, KP, thank you so much for taking time out of your day. I know there's a lot going on, and I certainly hope that I get to meet you in person at some point in time in the near future. But this was the next best thing for sure, just having this conversation and getting a chance to chop it up with you. But thank you very, very much.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
KPReddy 00:46:39.064 - 00:46:40.680 Absolutely. Thanks for having me. Randy 00:46:40.800 - 00:49:25.570 Absolutely. Well, folks, there you have it, another episode of the Zweig Letter podcast. We hope you enjoyed that. KP was better than advertised, and so I think that there's a lot to chew on. I would encourage you to do a couple of things. Listen to this podcast more than once. I would also encourage you to get the Show Notes and then maybe even read the transcript because there were some things there that shouldn't be lost in translation and you should hear exactly what KP's words were about artificial intelligence as it pertains to recruitment retention in the design industry space as it pertains to M&A and just overall how we should be looking at artificial intelligence in the design industry space. There are a lot of tremendous opportunities for us and as he said, it's not just something to help you size piping and do other things like that. None of us should be looking at the old way that we were doing the design as a whole and recognize the fact that AI is going to change and upend that and give you maybe some of your time back. It's going to give you the ability to develop some of those soft skills that we all need, especially when it comes to building relationships. Because honestly, those are the things that will move the needle in the design industry space. It will allow you to recruit better. It will allow you to work with your clients and have greater and more in-depth conversations with them. It will help you to decide what are the next steps and/or directions for your design firm, depending on where you're going to take it. So as a leader in the design industry, this is a tremendous episode for you, and we appreciate KP taking the time to share his background, knowledge, and experience. And so I hope you enjoyed this episode. Remember the Zweig Letter podcast comes out twice a month. You can sometimes watch the videos, but more importantly, just subscribe and or follow the Zweig Letter podcast to learn more about what's happening in the design industry on a regular basis. The Zweig Letter Newsletter has been out since 1992. So we're talking, and I don't do public math, but that's like 32 years that this Newsletter has been running without fail. And so you can read from all kinds of amazing thought leaders, including KP who have written in the Zweig Letter Newsletter so we encourage you to take advantage of that. You can subscribe. It is 100% free, just like this podcast is. We encourage you to get this information and share it with as wide of an audience as possible. If nothing else, just share it with the rest of your team at your firm and you will be the better for it. KPReddy Email: kp@shadow.vc Website: Shadow Ventures
So I'm Randy Wilburn, the host of the Zweig Letter podcast, and we'll see you back here real soon with another brand new episode, peace.
TZLOpen 00:49:26.510 - 00:49:30.206
Thanks for tuning in to the Zweig Letter podcast. We hope that you can be part of elevating the industry and that you can apply our advice and information to your daily professional life. For a free digital subscription to the Zweig Letter. Please visit thezweigletter.com and subscribe to gain more wisdom and inspiration. In addition to information about leadership, finance, HR, and marketing your firm. Subscribe today.
KPReddy Email: kp@shadow.vc Website: Shadow Ventures
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